Under Armour may have overpaid to get into college game, study says

Can Under Armour unseat Nike as the top brand in college sports? Not without paying a price.

The inroads Under Armour has made in the college athletics outfitting market have come at a price, a new study says.

The study – to be presented at the annual Sport Marketing Association conference in Philadelphia next week - says Nike has been such a dominant player that Under Armour and Adidas have had to overpay to compete.

“If you talk to Mr. (Kevin) Plank or anybody else at Under Armour, I don’t think they would dispute that,” said study co-author Jonathan A. Jensen, an Ohio State University instructor. “If you look at Nike’s market dominance, its not surprising that competitors would have to pay (a premium).”

The Baltimore-based sports apparel maker said it had no spokesperson available to discuss the study, which examined dozens of publicly available contracts of Under Armour, Nike and Adidas that were in effect during the 2013-14 academic year.

The study didn't fault Under Armour, suggesting it was simply paying the price of admission.

"The fact that they were able to get the Notre Dame contract, I think, is evidence that their approach is working," Jensen said.

Jensen and researchers from Texas A&M and Northern Kentucky University relied on indicators of what major-conference schools’ outfitting rights would be worth, and then assessed whether they were overpaid. The researchers considered such things as schools’ football attendance and all-time winning percentage in the sport, and the number of NCAA tournament appearances in men’s basketball.

The study relied on contracts available from the Portland Business Journal, which keeps a public database. Some major contracts were not available because they involve private institutions. 

For example, Under Armour’s big shoe and apparel deal with Notre Dame from last January is not included in the results. Neither is Under Armour’s new, 10-year, $33 million contract with Maryland because it took effect following the academic year. Under Armour has 14 such NCAA Division I partnerships.

The study said Under Armour was overpaying in 2013-14 under two of its biggest deals – its early contracts with Auburn and Maryland that helped establish it in the market.

“Under Armour pays Auburn a total of $4.25 million in cash and apparel, while the model suggests that despite Auburn’s football program advancing to the Bowl Championship Series National Championship Game in 2014, Under Armour should only be paying a total of $2.72 million,” a study summary says.

It says the company is paying the University of Maryland $1.38 million more than the $1.99 million that the empirical model suggests Maryland should be paid.

Maryland’s campus is less than 40 miles from Under Armour’s headquarters. Under Armour became the school's exclusive outfitter at the beginning of 2009.

The researchers  said Oregon-based  Nike is collectively overpaying Oregon, Oregon State, Washington and Washington State – perhaps because it does not want a rival sponsoring schools so near its corporate headquarters.

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